Kroger Co (NYSE:KR) stock fell 0.35% (As on December 6, 11:05:55 AM UTC-4, Source: Google Finance) after the company narrowed its annual outlook and reiterated confidence in its acquisition of rival Albertsons Cos. being approved by regulators. Kroger closed the sale of its specialty pharmacy business in early October for $464 million. The transaction reduced total company revenue last quarter quarter by about $340 million. A decline in sales of fuel, primarily from a lower average price per gallon, also hurt revenue. Retailers selling groceries have benefited from shoppers prioritizing food and other essentials amid high prices and interest rates, but buying cheaper cuts of meat or lower-cost store brands to stick to their budgets.
Meanwhile, Kroger is waiting for a federal judge to rule on its proposed acquisition of Albertsons for about $24.6 billion, a deal it announced over two years ago. The Federal Trade Commission blocked the acquisition, and the parties presented their case in September.
KR in the third quarter of FY 24 has reported the adjusted earnings per share of 98 cents, which met the analysts’ estimates for the adjusted earnings per share of 98 cents. The company had reported the adjusted revenue growth of 2.7 percent to $33.63 billion in the third quarter of FY 24, missing the analysts’ estimates for revenue of $34.26 billion. The decrease in sales was attributable to the sale of Kroger Specialty Pharmacy during the quarter and to lower fuel sales, which was primarily the result of a lower average retail price per gallon compared to last year. Gross margin was 22.9% of sales for the third quarter. Kroger’s net total debt to adjusted EBITDA ratio is 1.21 compared to 1.40 a year ago. The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.
Moreover, Digital sales grew 11%, driven by an increase in both households and traffic. Within digital, delivery sales grew at 18% and continues to outpace other channels. The Brands had a strong quarter with sales outpacing national brands again this quarter, led by mid-single-digit growth in the most premium brand, Private Selection. Customers continue to demand premium products but, at the same time, are looking for value.
The company pointed to an uncertain economic environment in saying adjusted earnings for this fiscal year will be as much as $4.45 a share, a cut of 5 cents from previous guidance. The grocery chain also trimmed its outlook for a key sales metric.